LONDON (ShareCast) - (ShareCast News) - Soft tissue manufacturer Accrol Group Holdings' shares fell almost 60% on Monday after the company projected a larger than expected EBITDA loss and the likely breach of banking covenants.
The group reported that it has engaged in discussions regarding debt headroom and resetting covenants with its bank as its net debt is expected to rise to approximately £34m at 30 April despite a gross £18m having been raised from shareholders in December.

A company statement said: "the Group's trading performance in the current financial year has been significantly impacted by three major issues - an escalation in internal costs, input costs and adverse foreign exchange hedging."

The AIM-traded company said it was committed to resolving cost issues after changes including the opening of a warehouse facility in Skelmersdale and increased labour costs from new plants in Blackburn and Leyland have led to a 50% increase in cost base, excluding input costs.

In the interests of cutting costs the company is currently engaged in discussions to dispose of underperforming areas of the business and aims to restructure its logistics which will yield an expected saving of over £5m annually.

Regarding the managing of input costs, a company statement said: "The Group has already exited some low margin contracts. In addition, the manufacturing of napkins has been terminated due both its small scale and unsatisfactory financial returns."

As of 1145 GMT, Accrol Group Holdings' shares were down 58.04% at 11.00p.

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